In the heat of the summer 2011, officials at World Heart Corp. were scrambling to keep a deal with HeartWare International alive.
Last June, company officials at World Heart watched a $25 million initial non-binding offer from Framingham, Mass.-based Heartware dissolve during due diligence. The company was backing off over uncertainties with Salt Lake City-based World Heart’s flagship Levacor ventricular assist device program, which was still languishing in a stalled clinical trial with the FDA.
By the end of July, World Heart had cut its staff in half and tabled the Levacor program, but managed to keep talks with Heartware alive.
The fruits of those talks wouldn’t be harvested until March 2012, when the companies consummated an $8 million deal paid mostly in shares of Heartware stock, according to new regulatory documents released in connection with the merger.
Those documents show a complex deal which took more than a year to complete, during which time World Heart hired and fired it’s investment banker, was turned down by more than 16 companies and laid off nearly all its staff. At one point company officials contemplated selling off all of World Heart’s assets in a fire sale to pursue a reverse merger and essentially turn the firm into a shell through which a private firm could assume the company’s stock without going through the onerous IPO process.
The deal began in earnest in March, 2011, when World Heart hired Barclays Capital to assist in exploring a potential sale to a group of large-cap and mid-to-small-cap companies.
By that time, World Heart had already paused enrollment in clinical trials of its Levacor device, a magnetically levitated, bearingless, implantable centrifugal pump, in order to make refinements to the system based on initial clinical experience.
In conversations with the FDA "it became increasingly clear that as we went down, process time lines we were hoping for were not going to be achieved and we were going to be delayed significantly," World Heart CFO Morgan Brown told MassDevice last summer.
Barclay’s contacted more than 16 potential buyers, but just Heartware and 2 other unnamed companies agreed to explore a potential sale.
By June 6, 2011, Heartware was the only suitor left. The company’s senior vice president and general counsel Lawrence Knopf submitted a $25 million non-binding indication of interest, but the deal soured on July 12 when Heartware officials, citing concerns over the Levacor trial and the company’s other projects, decided not to move forward with a merger.
For the next several weeks, as World Heart was suspending its Levacor efforts and cutting staff, officials maintained ongoing dialogue with Heartware CEO Doug Godshall. Those talks continued for several months with each side looking for ways to create a partnership or joint venture.
At the same time, officials at World Heart looked for ways to sell off some of the company’s more than 100 patents or the rights to intellectual property for the PediaFlow VAD program. World Heart officials explored other ways to exit the company, including selling off its intellectual property to Heartware for $3.5 million in stock and then executing a reverse merger to a private company looking to assume World Heart’s public listing on NASDAQ.
In February 2012 World Heart laid off 77% of its workforce as it negotiated a new letter of intent from Heartware. Those negotiations continued until the end of March when the companies announced that they had agreed to a $8 million merger, to be paid in either cash or Heartware stock.
"In line with our goal to be a leader in the VAD market for years to come, we believe that bolstering our patent portfolio and adding World Heart’s technologies broadens our options for the future," HeartWare president & CEO Doug Godshall said in prepared remarks.
The companies signed the deal in March, under which each share of World Heart common stock will be converted into the right to purchase an equivalent in HeartWare shares or will be paid out in cash. World Heart shareholders are expected to vote on the merger agreement at a special shareholders meeting on August 2nd.